How is the newly launched ChatGPT advertisement?

OpenAI launched ChatGPT advertising testing in February, but this highly anticipated commercialization attempt is facing a “hasty” and “chaotic” start.

According to ZF Trading Desk, on February 23, UBS released the “ChatGPT Advertising Expert Conference Call Minutes,” where an expert managing approximately $800 million in digital ad budgets bluntly stated that the ChatGPT ad experience is “worse than early Google, Meta, or even Snapchat.”

Although the market hopes ChatGPT ads will shake up Google’s search dominance, currently, ad budgets are only from vendor testing expenditures (less than 10% of total budgets), with no impact on Google.

The current $200,000 minimum participation threshold, confusing user experience, and unsatisfactory ROI suggest that the commercialization of ChatGPT ads still has a long way to go.

High Entry Barrier: Open Only to Major Players

OpenAI has set a minimum spend commitment of $200,000 for ChatGPT ads, effectively limiting participation to large advertisers with monthly budgets over $10 million. Testing began in February, with the duration yet to be determined.

Despite the high threshold, market enthusiasm remains strong. The expert observed widespread adoption across vertical industries—furniture retail, automotive, subscription consumer goods, luxury brands, B2B, and food sectors are all involved. Advertisers can choose the ad formats they want to test.

Four Ad Formats: From Brand Exposure to Closed-Loop Transactions

ChatGPT currently offers four ad formats, but experts expect this to expand to 15-20 in the future:

Sponsored Recommendation Ads serve as the main brand ads, inserting brand text into natural responses to user queries, priced at CPM (cost per thousand impressions), with an average price of about $60.

Carousel Ads allow users to scroll through multiple images, each clickable to specific products. However, the feature is still immature—each image links to only one SKU, and all images direct to the same landing page on the merchant’s website. Compared to Google and Meta, there’s much room for improvement.

Accompanying Display Ads appear on the side of chat texts, serving as a display version of sponsored recommendations. Experts note that advertisers can reuse existing creative assets, lowering adoption barriers. This format is positioned as a brand ad, with success measured by a combination of awareness and traffic generation.

Native Content Shopping Cart Ads may be the closest to “intelligent agent ads.” Users can click on a product, view details, and complete checkout within ChatGPT without redirecting to the seller’s website. This format charges a percentage of GMV (gross merchandise volume).

However, this closed-loop transaction mode has sparked controversy. Experts point out that this format is suitable for bulk commodities; high-end brands may hesitate because they lose opportunities for upselling, cannot reinforce brand image via official websites, and cannot collect user data for retargeting.

Budgets and Returns: The Gap Between Ideal and Reality

Currently, ChatGPT ad budgets come solely from advertiser testing budgets, with no impact on Google search budgets. Experts note that brand advertising budgets usually have caps and may shift from other channels in the future; performance-based budgets (if ChatGPT can demonstrate improved ROI) could be incremental.

In terms of ad performance, data is mixed. ChatGPT ads have shown “good click-through rates,” but ROI varies, and limited data and small sample sizes make definitive conclusions difficult.

Pricing-wise, a CPM of $60 is significantly higher than social media and streaming media ads. But experts believe this comparison is not appropriate; instead, it should be benchmarked against Google Search. With Google Search ads costing about $2 per click and generating 200 conversions per 1,000 clicks, the cost per conversion is $40. Compared to that, ChatGPT’s $60 CPM isn’t expensive.

But the key issue is conversion rate. Sponsored recommendation ads have an average conversion rate below 0.5%, meaning about $12 per click. Based on this, experts argue that ROI must improve for the ads to remain commercially viable.

Chaotic State: Worse Than Early Google and Meta

Experts bluntly describe the current ChatGPT ad experience as “hasty” and “chaotic,” even “worse than early Google, Meta, or Snapchat experiences.”

Core issues include:

Lack of performance data makes it difficult for advertisers to measure and optimize ad units. Experts expect this to be a priority for ChatGPT to address.

No CRM integration means ads display static information—even if a product is out of stock or unavailable, the ad continues to show.

Fully manual operation is the biggest pain point. Google and Meta already offer automation tools for creative production, selection, and placement, but ChatGPT advertisers currently must manually choose all content. Experts believe OpenAI’s generative AI and intelligent agent capabilities should easily solve this.

Limited bidding mechanism is another flaw. Currently, if two advertisers bid for the same ad space, OpenAI only shows the more relevant ad. In contrast, Google uses a combination of price and relevance to determine ad display.

Ad delivery and targeting issues are also prominent—sometimes ChatGPT shows irrelevant ads to users. Experts speculate this may be due to current keyword targeting rather than LLM capabilities for content relevance. They believe this should be a “quick fix.”

Looking Ahead: Potential Turnaround in 6-12 Months

Despite the many issues, experts still expect that within 6-12 months, ChatGPT will become a more scalable advertising platform. The minimum spend threshold is also likely to decrease, allowing more advertisers to participate in testing.

But for investors, the core question remains: When will ChatGPT ads truly start to eat into Google’s search market share? The current chaotic start and disappointing ROI suggest that this day may come later than market expectations.

This insightful content is from ZF Trading Desk.

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